London's super-rich

Accused of avoiding their taxes, buying up street after street of London property and leaving it empty while they sun themselves in the Caribbean – these are not comfortable times to be an ultra high net worth individual.

For years, the capital has been a magnet for the world’s super-rich, but London – or at least a sizeable part of it – seems finally to be fighting back. The rich have been threatened with mansion taxes, abolition of non-dom status and the attentions of Occupy protesters.

How should you respond if you are a high net worth individual? Do you take it on the chin, fight back – or leave?

There is a big temptation by the wealthy – or more accurately people who speak on their behalf – to hit back with statistics. You think we’re a load of tax-avoiders who pay nothing on our billions while London’s strivers pay the taxes which help clean the streets outside our mansions and pay for the police to keep criminals out of our homes while we are enjoying ourselves abroad? Just look at the taxes we pay.

In fact, calculates HMRC, 4 per cent of all income tax in 2012/13 was paid by non-doms. Since 2008, non-doms who have been in the country for more than seven years have had to pay an annual fee to protect their status and avoid paying tax on assets kept outside the country. These fees are quite substantial: £30,000 in the case of those who have been living in Britain between seven and 12 years, rising to £90,000 for those who have been here for more than 17 years. Nevertheless, these fees, at £226m in 2012/13, constitute a tiny proportion of the tax paid by non-doms. The vast majority of tax – £4.6bn – was paid on income and investments they did bring in.

And, you might want to add, what about all the fancy handbags we buy in Harrods, helping to keep the UK economy ticking over? A survey last year by Ramidus Consulting attempting to calculate the amount of money added to the Central London economy by owners of expensive houses. Their conclusion was that owners of houses worth more than £5m spend an average of £2-£3m in the British economy, while owners of houses worth more than £15m spend between £4m and £5m.

The money flowed into the London economy in spite of the wealthy themselves often being absent, the survey concluded, as domestic staff still had to be employed and maintenance carried out even if they were spending only a few weeks in the country. Many also chose to seek private medical treatment in London and spend money on London lawyers.

But I don’t think it is really going to wash. Reeling off statistics just makes you look like Gordon Brown at his most hubristic. In any case, there are plenty of holes in the above for critics of the super-wealthy to exploit.

What the Ramidus survey didn’t say was how much of this money lavished on the UK economy ended up in the hands of British workers.

What, then, about philanthropy? You could, for example, emulate Lord Sainsbury who, according to The Sunday Times Giving List this year, lavished over 40 per cent of his worldly wealth on a variety of causes in education, and the humanitarian and arts sectors. His gifts of £203.2m left him with £507m, but it is still a huge amount for an individual to give.

Philanthropy, though, doesn’t necessarily earn you the adulation of the British masses. Everyone knows the name Sainsbury, but how many have heard the name Terry Bramall? On last year’s Giving List, he was Britain’s third biggest philanthropist, giving away £107m to causes such as the Northern Ballet, the Leeds International Pianoforte contest, Birmingham University and Botton Village, a community in Yorkshire for adults with special needs.

Yet his generosity has not made him a household name, at least not outside his home town, Harrogate where in 2008 he told reporters he earned £500m from the sale of his construction company Keepmoat. “It was, and is, a staggering amount of money, more than anyone could ever justifiably spend,” he said.

There is another sort of giving, however, which is all too likely to get your name in the papers – and for the wrong reasons: donating to political parties.

That is the crux of the problem, according to Ed Mead of estate agents Douglas & Gordon: unlike in the US, where there has long been a culture of giving, we have a suspicious attitude towards those who give their money away to anyone other than the taxman.

“While the super-rich are hardly shrinking violets, there is very little to be gained from making themselves conspicuous,” he says. “Make a philanthropic gesture and many people will start wondering if you are only doing it for some tax break or in the next breath they will be asking: ‘What are you expecting: a knighthood?’”.

What about the charge that the world’s super-wealthy are monopolising the housing stock, pricing out locals – and, worse, that they aren’t even living in their properties, instead leaving them empty for months of the year? There are plenty of figures bandied around on this.

The think tank Civitas claimed in 2012 that 85 per cent of prime London properties were bought with foreign money. In 2013 Chestertons reported that between 65 and 70 per cent of new-build housing in the prime London housing market over the previous two years had gone to foreign buyers.

A study last year by Knight Frank, though, put a slightly different spin on the figures. In the 12 months to June 2013, it estimated, 49 per cent of all £1m plus sales in Prime Central London were sold to foreign buyers. But only 28 per cent of the buyers, it reckoned, were not resident here.

That is still a lot, though. There are plenty of would-be residents of Central London who would jump at the chance to get their hands on those properties. But then according to Jonathan Hewlett of Savills it is a myth that there was once a time when London’s prime residential districts were buzzing with families.

“A lot of people use properties more than they did in the past,” says Hewlett. “All the prime parts of Belgravia were owned by the aristocracy who only ever used them periodically.” It is a view echoed by Ed Mead, who insists there were just as many unlit windows in Eaton Square in the 1980s as there are now.

If London property is not going to be monopolised by the super-wealthy, it is up to the government to legislate, not left to rich investors to show restraint, says Paul Blanchard of Right Angles PR, who represents many industry leaders. “Wealthy individuals are just doing what they can within the law. If society has a problem with property being bought up by the wealthy then the politicians should do something about it. Other countries have rules which prevent property falling into foreign hands – and they work.”

But if the super-wealthy are really going to improve their image I don’t think I would recommend a ‘don’t blame me, guv’ attitude. If I were advising them I’d want one of them to put their head above the parapet and give an interview. More tax? Of course I’ll pay it. Isn’t it silly that I only pay the same council tax on my £10m mansion as people pay on a small flat?

As for you shy philanthropists, I would want you to creep out from the back of your private boxes at the Royal Opera House, or wherever else you are hiding, and make a show of giving money away. It hasn’t done Bill Gates any harm. Why not go further and one of you come forward and say it is utterly ridiculous, given the number of wealthy individuals in London, that the City’s opera houses, theatres, museums and galleries are still reliant on the public purse. They should be bursting with riches from wealthy donors. Ultimately it is partly self-interest, as cultural activities fall increasingly under pressure in government budgets. If you don’t fund the arts, maybe no-one will in future.

In business, there are plenty of growing British companies who could do with some finance of share capital. Could wealthy individuals put something back into London’s infrastructure, parks and public spaces? Considering the council tax rates paid on multi-million-pound houses in Belgravia are unfeasibly low, it’s not much to ask.

As for property, why doesn’t one of you come out and say: it is utterly ridiculous that someone like me can come along and scoop up all the new-build flats, so that no-one on a normal salary can afford a home. Stop us! Put covenants on most of these flats, saying they can only be bought by people who are going to live in them or rent them out to local workers, creating new, vibrant communities instead of ghost town developments with the lights out.

From a dingy city of high taxes and endless economic crises in the 1970s, London has grown into the biggest magnet on Earth for international wealth. While the wealthy themselves may in some ways have been unfairly demonised, those who want to make sure London remains as a good neighbourhood for billionaires should recognise that obeying the rules isn’t enough.